[SPEAKER_03]: This is Invest Talk from KPP Financial, helping investors make sense of the markets one day at a time.
[SPEAKER_03]: Here's your host, Justin Klein.
[SPEAKER_02]: Good afternoon fellow investors and welcome back to another edition of Invest Talk.
[SPEAKER_02]: And I'm excited for this hour to speak with you.
[SPEAKER_02]: Whatever is on your mind, we are here for it.
[SPEAKER_02]: The show is about making you a better investor.
[SPEAKER_02]: And we mainly do that by bringing you data, bringing you perspective so that you can make better decisions with your money that most of all is about you, what is on your mind.
[SPEAKER_02]: That's why we collect your questions in various ways.
[SPEAKER_02]: Our favorite, as always, a live call or leaving a question on our voice bank, 24, 7 either way, that is a great way.
[SPEAKER_02]: Those are great ways to get us your questions, your concerns, so that we can not only help you but help others than the best talk community.
[SPEAKER_02]: Does that gear in to you?
[SPEAKER_02]: And whatever sign you're mind, question you might have is something another invests like listener has as well.
[SPEAKER_02]: So you're helping many of you out there by picking up the phone and giving us a call.
[SPEAKER_02]: So give me, I'm ready for whatever's on your mind, 8 to 899 chart is how to get through,
[SPEAKER_02]: and ask your question on today's show.
[SPEAKER_02]: Now just a bit, we'll talk about today's mark performance and then run down show topics for the hour, but first let's tackle this first call a question now.
[SPEAKER_08]: So I wanted to get your opinion on spell, why I'm much like it, that take a sample with us, and thank you.
[SPEAKER_02]: All right, looking at Sprouts, SFM is the symbol.
[SPEAKER_02]: It's a name that we use to own for clients.
[SPEAKER_02]: Still like the name.
[SPEAKER_02]: I'm just pulling up that, my, my computer's running a little, little, little behind day.
[SPEAKER_02]: It's a, maybe it's the heat.
[SPEAKER_02]: I'm not sure, but it's definitely dragging a little bit, but sprouts his name, like I said, we used to own for clients.
[SPEAKER_02]: We sold it as it started to lose its momentum, well above $100 per share, and it continues to kind of lose some momentum.
[SPEAKER_02]: but it's still a very, very good business.
[SPEAKER_02]: Good balance, she only about $2 billion in debt on a $7 billion market cap.
[SPEAKER_02]: Free cash flow of $360 million, which is down from its all-time high around 500 million.
[SPEAKER_02]: But you're still getting a free cash flow yields of about 5% or so.
[SPEAKER_02]: It's pretty good.
[SPEAKER_02]: We're turning that quick 36% like that.
[SPEAKER_02]: It's what it's doing if it's cash flow.
[SPEAKER_02]: It's buying back share as it continues to do that.
[SPEAKER_02]: So I think it's a good capitalication earnings this year.
[SPEAKER_02]: This will be a 5% and then 6% next year.
[SPEAKER_02]: And the reason it's struggled recently, I think is more to do with that slowing of growth.
[SPEAKER_02]: In 2023, earnings are up 19%, 204, earnings are up 32%, 2025 last year, earnings are up 42%.
[SPEAKER_02]: But since then, once again, expectations for growth has slowed dramatically, which means multiple contraction.
[SPEAKER_02]: Question is,
[SPEAKER_02]: is this cheap enough because for looking EBITDA and the price value is only at about 10 which near the low end of its range.
[SPEAKER_02]: My issue though is the technical's remain to poor.
[SPEAKER_02]: It just recently had a high run then you won and just somewhere the past 6, 7, 8 trading days or so it's down to like I said, 92 and change.
[SPEAKER_02]: So quite the pullback.
[SPEAKER_02]: I would probably take a shot on it around 65.
[SPEAKER_02]: I think it's good for us to reward at those levels.
[SPEAKER_02]: The question is, where is the ultimate bottom here?
[SPEAKER_02]: I think long term, this is a good air.
[SPEAKER_02]: Anything in the 60s I would say is a good, you're talking about 10 times for looking earnings for bringing else out there sprouts.
[SPEAKER_02]: They're big here in California.
[SPEAKER_02]: They have a lot of stores, grocery stores here.
[SPEAKER_02]: It's all about organic foods, natural foods,
[SPEAKER_02]: Vitamins, supplements.
[SPEAKER_02]: It's a great source of shop there regularly.
[SPEAKER_02]: So I love the business, I love the store, I like the long-term value here, but I understand the technical still leave a lot to be desired.
[SPEAKER_02]: I would want to see this in the mid 60s to really load up.
[SPEAKER_02]: But I think you're getting there.
[SPEAKER_02]: And with a lot of ground to cover, over the next 45 minutes or so time permitting, we'll get to all of it.
[SPEAKER_02]: We had a great show yesterday, we looked into this story, how to protect your portfolio from inflation's second wave.
[SPEAKER_02]: We also answered a little bit of question on Costco, so if you happen to miss it, go check it out.
[SPEAKER_02]: Best way to get every show is to follow and best talk wherever you get your podcasts.
[SPEAKER_02]: And once again, we have a great show for the next 45 minutes or so our main focus point is now retail investors are chasing the shiny objects.
[SPEAKER_02]: Well ignoring the S&P new data shows retail traders are piling into speculative assets.
[SPEAKER_02]: And momentum plays, sector momentum plays.
[SPEAKER_02]: This is a behavioral platform pattern that is historically late, cycle, risk taking.
[SPEAKER_02]: So we'll explore the cycle.
[SPEAKER_02]: It's a ecology behind this trend in why Chasing Shiny Objects always ends badly for individual investors.
[SPEAKER_02]: We'll also have, we'll talk about other topics, including Brussels and European banks.
[SPEAKER_02]: They're actually loosening their regulations.
[SPEAKER_02]: a good thing for the broader economy, at least in the short term.
[SPEAKER_02]: It's inflationary.
[SPEAKER_02]: We'll talk about that, what they might mean for the broader economy.
[SPEAKER_02]: And then, small gaps are doing very well.
[SPEAKER_02]: They're doing their best return in more than 20 years.
[SPEAKER_02]: Why is that?
[SPEAKER_02]: We'll talk about that.
[SPEAKER_02]: But also, Mane, I want to note, it's on your mind.
[SPEAKER_02]: 80 at 99 chart is how you get through and ask your question.
[SPEAKER_02]: On today's show, as always, but we have voice bank questions on the I-Share's core divinetef, d-i-v-b, as well as coherent, CO-H-R, and then of course questions that came in via the Investock YouTube channel.
[SPEAKER_02]: As well, once again, we're going to go to a quick break, please remember you can call any time and leave your question on the Investock voice bank, and if you're listening via our live stream, or a positive name, so I'll tell you in the Bay Area, you can call right now at 8-8-Manginang chart.
[SPEAKER_02]: Up next, I will comment on today's market activity.
[SPEAKER_03]: There are a few things that make KPP financial special.
[SPEAKER_03]: One of them is parallel investing.
[SPEAKER_03]: This means they invest right alongside their clients.
[SPEAKER_03]: Here's how it works.
[SPEAKER_03]: When KPP financial makes a trade for their clients, just in client makes the same trade for himself and KPP.
[SPEAKER_03]: On the same day, at the same price and same percentage.
[SPEAKER_03]: No front running, no special treatment.
[SPEAKER_03]: Learn more about Parallel Investing at Investalk.com.
[SPEAKER_02]: Take a look at the market today.
[SPEAKER_02]: It was a bounceback day, overall, especially for the NASDAQ, up about two thirds of 1% really driven by the mag seven to have been doing well.
[SPEAKER_02]: But what's interesting is the chip stocks.
[SPEAKER_02]: They struggle today, despite news that Apple is eyeing with Central Acquisition of the AI chip company,
[SPEAKER_02]: Maybe it's a smaller name that's going to compete with these other AI chip names.
[SPEAKER_02]: We'll see that was the big news.
[SPEAKER_02]: You also had a buyout of PayPal by a, a, looks like a combination of stripe and a private equity firm.
[SPEAKER_02]: So that was just some big news on the day from an economic standpoint you had PPI that was a bit lower than expense expected consensus was 0.4% growth and actually was 0.2% prior was 0.1 so you're still getting acceleration in that growth of it's especially ex food and energy if you look at the broader number it was down about
[SPEAKER_02]: three tens of one percent consensus, expectation was a deceleration at point two, two, five percent.
[SPEAKER_02]: So once again, food energy, the core number remains.
[SPEAKER_02]: Elbid wasn't as bad as the market had been expected.
[SPEAKER_02]: Empire manufacturing, that saw an acceleration.
[SPEAKER_02]: Had I really increased by 9.9 points to plus 15.6, way above consensus.
[SPEAKER_02]: The demand on the manufacturing side continues to be strong.
[SPEAKER_02]: Obviously, driven by AI data center.
[SPEAKER_02]: CapEx, retail sales came in at 0.3%, growth, following a 0.9% increase in May.
[SPEAKER_02]: So desaleration, their core, the core group expected to get 0.4 after a 0.7% gain.
[SPEAKER_02]: So retail sales still relatively strong, but definitely desalirating their month over month.
[SPEAKER_02]: BlackRock did have a comment on private credit.
[SPEAKER_02]: It's talked kind of up the industry and it's institutional demand.
[SPEAKER_02]: I'm not sure if I believe that, but that's at least the did move that stock today in a big, big way.
[SPEAKER_02]: So overall, you had, let's see, Treasury is a bit stronger yields down about one to five basis points across the curve, dollar index off 0.5%.
[SPEAKER_02]: What now is a bit more dovish expectation for rate hikes that continues to come down from closer to two rate hikes expected by year end.
[SPEAKER_02]: And now, what are we at?
[SPEAKER_02]: Yeah, I mean, the market's base case is basically one rate hike.
[SPEAKER_02]: Maybe less.
[SPEAKER_02]: I'm starting to because of the political backdrop
[SPEAKER_02]: inflation, which I think is still going to be sticky, high, but maybe not accelerating.
[SPEAKER_02]: In the back half of the year, I think that you could see the fed doing nothing.
[SPEAKER_02]: And the market's starting to price that in, that's what you saw.
[SPEAKER_02]: Once again, dollar weaker, rates down a little bit.
[SPEAKER_02]: gold was down 0.4% of the day, silver off 0.2 or 2.8% of the day, Bitcoin up 0.4, WTI was up slightly on the day as what's going on in the US or any Ron continues to.
[SPEAKER_02]: I don't say spiral, but just bubble on me to surface.
[SPEAKER_02]: No, no resolution on the horizon over in the Middle East.
[SPEAKER_02]: So that was
[SPEAKER_02]: So a lot of the hardware names, say I'm just down to eight percent, my current down to eight percent, I said this over the past couple of weeks that the hardware names, there's been a lot of growth extrapolation into the future that reminds me a lot of what happened with Zoom during COVID and I think there's a correction in the works within that space.
[SPEAKER_02]: Maybe it's one to buy eventually, but it creates a lot of near-term risk for that part of the market.
[SPEAKER_02]: you're getting a broad-based strength from other sectors.
[SPEAKER_02]: And that likely will likely keep the S&P relatively buoyant.
[SPEAKER_02]: So that was the market today.
[SPEAKER_02]: And I was swing back to the Best Lock Voice Bank for a fresh listener question now.
[SPEAKER_08]: I'm looking to get your thoughts on Twilio, take your TWLO.
[SPEAKER_08]: I'm looking to hold for three plus years, but I really want to get the Best Talks and put thanks in advance, bye.
[SPEAKER_02]: T-W-L-U-L-Tool-E-O.
[SPEAKER_02]: This is a very interesting one.
[SPEAKER_02]: It's a name that struggled to make money for a long period of time and then it became profitable.
[SPEAKER_02]: And so it's the earned 6,000, 65 cents next year.
[SPEAKER_02]: Growth is in the load of mid-teens, but based on forward-looking earnings, you're talking, you know, mid-30s multiple.
[SPEAKER_02]: It's pretty expensive in my book.
[SPEAKER_02]: I think this is ran.
[SPEAKER_02]: It's too expensive, I don't think this is a good time to get in.
[SPEAKER_02]: And the question is, will AI disrupt what they do?
[SPEAKER_02]: It does messaging and voice.
[SPEAKER_02]: It's basically, for my member, it creates these kind of plug-ins for software developers and I'm surprised that this is to kind of create certain features for software very easily.
[SPEAKER_02]: And the question is, will AI use surf that?
[SPEAKER_02]: I think there's a lot of risk there.
[SPEAKER_02]: after the recent run.
[SPEAKER_02]: So I would be out on Twilio, T-W-O-O.
[SPEAKER_02]: And I work to use after this brace, give me a call now at 8.99 chart.
[SPEAKER_03]: It's official.
[SPEAKER_03]: Total lifetime downloads for the Invest Talk podcast are now more than 63 million.
[SPEAKER_03]: Justin Klein is here now taking your calls live.
[SPEAKER_03]: Invest Talk 88899 chart.
[SPEAKER_02]: Let's talk about a proposal that is due on Friday.
[SPEAKER_02]: This is going to be a very interesting
[SPEAKER_02]: essentially development.
[SPEAKER_02]: This is around the European commissions regulation on banks.
[SPEAKER_02]: For years, lenders have argued that the overlapping capital requirements from different authorities across the world really puts them at a disadvantage and a lot of them are
[SPEAKER_02]: U.S. and U.K. recently lowered capital requirements or levered ratio, ratios on the banks, and what it's going to do if they'd rolled this back and put them on par with U.S. the United States in the U.K. is unlock lending capacity.
[SPEAKER_02]: Now sounds boring, but it's very important.
[SPEAKER_02]: I said this, I said it's time and time again.
[SPEAKER_02]: It's one of the most important
[SPEAKER_02]: Metrics to follow for the macro environment.
[SPEAKER_02]: What's going on with the broader economy?
[SPEAKER_02]: Our banks lending more are the lending less.
[SPEAKER_02]: Not just here in the US, but abroad as well.
[SPEAKER_02]: As a member, money is fungible.
[SPEAKER_02]: What does that mean?
[SPEAKER_02]: Means that when you borrow money, it creates currency.
[SPEAKER_02]: It adds more leverage to the bank balance sheet, it creates currency 10 to 1 typically.
[SPEAKER_02]: compared to deposits that are on that are in that bank.
[SPEAKER_02]: Okay, so if you borrow a million dollars, the bank only has that about $100,000 of deposits, that extra $900,000 was just created into existence.
[SPEAKER_02]: And then you can take that million dollars and you can go buy yours.
[SPEAKER_02]: Go buy yen.
[SPEAKER_02]: Go buy Indian Ruby and do business there or buy something in those countries.
[SPEAKER_02]: So if the European Commission is going to loosen standards and allow their banks to lend more, well, that could be more euros that are created that then get translated back in the dollars and then buys real-world assets, stocks, bonds, can do more business here in the US, et cetera.
[SPEAKER_02]: And this is the case for banks around the world, especially the largest economies from China,
[SPEAKER_02]: And beyond, so this new draft, this is just a proposal that's coming off Friday.
[SPEAKER_02]: Its goal is to improve competitiveness within the sector.
[SPEAKER_02]: It's going to overhaul the European deposit insurance scheme, kind of like the FDIC.
[SPEAKER_02]: It's a plan that's been deadlocked for years because countries like Germany don't want
[SPEAKER_02]: that creates a bank failure that is now puts, for example, German citizens on the hook for losses in other parts of the Eurozone.
[SPEAKER_02]: So this is designed to kind of shore that up, and it will also allow them to move capital around the Eurozone more freely.
[SPEAKER_02]: Because right now, for example, they want to, they want to, they want to,
[SPEAKER_02]: The point is, this is going to potentially change the way the European industry, our banking industry works and can provide more liquidity for the broader economy.
[SPEAKER_05]: I'm a long-term buy-and-hold investor and I'm looking for your take on coherent corp ticker COHR with the explosive growth in AI infrastructure and data-sitter demand.
[SPEAKER_05]: They're fundamental seems strong however the stock has had a massive run and I'm seeing some mixed short-term signals recently.
[SPEAKER_05]: As someone who wants to keep and hold for the long-haul,
[SPEAKER_05]: or it's a valuation is getting stretched enough that's worth taking some profits and where do you see the fair value right now?
[SPEAKER_05]: And would UBA holder here or looking to trim the position?
[SPEAKER_05]: Thanks guys, love the show and appreciate your unbiased analysis.
[SPEAKER_02]: Go here, it's a company that is engaged in development, refinement manufacturing and marketing of engineering materials, optical electronic components and devices,
[SPEAKER_02]: and lasers in the use of industrial communication, electronic and instrumentation markets, I know that was amelphful.
[SPEAKER_02]: But they have three segments, networking, materials, and lasers.
[SPEAKER_02]: Their business has boomed as the college said in the AI era.
[SPEAKER_02]: Herding's this year's will be 546 up from $353 last year and $1.67 a year before.
[SPEAKER_02]: So a business is booming.
[SPEAKER_02]: Problem is that it's now trading at,
[SPEAKER_02]: mid 30s multiple going forward which is on the expensive side and return equity is still pretty meager and free cash flow is negative.
[SPEAKER_02]: So why is free cash flow cratering?
[SPEAKER_02]: That's my big question I need to answer that question.
[SPEAKER_02]: Is it they're building out capacity?
[SPEAKER_02]: What is it?
[SPEAKER_02]: The balance sheet
[SPEAKER_02]: I just don't like the profitability and you're right, near term, the whole industry is pulling back, and this is similar, so I would be very patient on this name and I really want to understand the cash flow dynamics that are at play right now.
[SPEAKER_02]: The next and best thought we'll look into this question, is it a really ignoring a real geopolitical threat to tech stocks?
[SPEAKER_02]: We'll talk about that tomorrow, but for now I'm Justin Klein, ready to take your calls at 8.89 in chart.
[SPEAKER_02]: At KPP Financial, Accountability means more than advice.
[SPEAKER_02]: It means we invest alongside you through our parallel investing approach.
[SPEAKER_02]: When we recommend an investment for clients, one or more KPP principles invest their own capital at the same time.
[SPEAKER_02]: Same day, same price, same percentage.
[SPEAKER_02]: If your portfolio moves, ours does too.
[SPEAKER_02]: That is alignment.
[SPEAKER_02]: That is transparency.
[SPEAKER_02]: That is the KPP Difference.
[SPEAKER_02]: Visit www.investalk.com to get your free portfolio review.
[SPEAKER_03]: Invest talk, tell your friends they can listen live, download the free podcast, or watch Invest Talk on our YouTube channel, and they can leave their finance and investment questions anytime on 888-99 chart.
[SPEAKER_02]: Our main focus point today is about retail investors and how retail investors are chasing Shiny Objects, while ignoring the S&P as a whole.
[SPEAKER_02]: And this is typically late cycle behavior.
[SPEAKER_02]: And the latest evidence is really Bitcoin.
[SPEAKER_02]: Investors piled into these Bitcoin ETFs throughout 2024 and into 2025.
[SPEAKER_02]: But since it's pretty much greater.
[SPEAKER_02]: And aggregate investors in the original cohort of Bitcoin funds lost on average 5.8% annually.
[SPEAKER_02]: For October of 2024, the January of 25, some pretty short period of time, when Bitcoin was up over $100,000.
[SPEAKER_02]: Investors put in $20.7 billion into these funds.
[SPEAKER_02]: been from May of last year through July, they put another 15.7 billion.
[SPEAKER_02]: But from November last year through May, the price of Bitcoin collapse over 30%.
[SPEAKER_02]: And investors pull that $6 billion out of those funds locking in those losses.
[SPEAKER_02]: This is very, very common.
[SPEAKER_02]: You see this with the round hill meme stock.
[SPEAKER_02]: ETF as well.
[SPEAKER_02]: It's up 35% this year, but it's still down dramatically from when it launched October of last year.
[SPEAKER_02]: The viewer under about during the initial inception are now under water.
[SPEAKER_02]: And you also see investors now pile in to things like the data infrastructure ETFs.
[SPEAKER_02]: The DRAM, right, around-hill memory ETF, that has over $8 billion in a single month recently.
[SPEAKER_02]: So investors are actually selling out of the S&P, a lot of the Mac's seven names, because they're not working.
[SPEAKER_02]: And into these highly volatile, high-baden names.
[SPEAKER_02]: Problem is history shows that by the time the theme hits the market and you have these ETFs that are launched, that is the worst time to invest in them.
[SPEAKER_02]: Institual money is already priced in future earnings growth and just a small disappointment and a reversal of those flows means big drop, big losses for the average person that got in when those themes were all over CNBC, all over the Wall Street Journal and most of the good gains were behind them.
[SPEAKER_02]: It causes individuals to reject short-term outperformance indefinitely into the future and it also capitalizes on us being humans.
[SPEAKER_02]: We are story-driven people.
[SPEAKER_02]: We're emotional people.
[SPEAKER_02]: So what we are, we're emotional beings.
[SPEAKER_02]: Now when investors aggressively rotate into speculative high-bit assets like these DRAM ETFs.
[SPEAKER_02]: This is late cycle behavior.
[SPEAKER_02]: This happened in speculative assets in 1989, as well as 2021 with the meme stocks and specs over that.
[SPEAKER_02]: And when the fundamentals don't support the valuations and there's that reversion of the mean, well, you see what happens in years like 2022.
[SPEAKER_02]: So how do you handle this?
[SPEAKER_02]: Number one is, it's okay to sprinkle in some,
[SPEAKER_02]: speculative bats in your portfolio, but it should be a small percentage, five to 10% of your portfolio, not 56,78, 100%.
[SPEAKER_02]: And it's okay to make these constituted bats on a thicker sector when you have a legitimate informational or analytical edge, not because you read it in an article or sold in CBC or because you're brand new or cousin bought it,
[SPEAKER_02]: No.
[SPEAKER_02]: So because you have a deep expertise in the sector, for example, if you're a doctor and you understand the biotech field, maybe you're in software and you understand what type of software products are in demand and not in demand.
[SPEAKER_02]: Whatever that might be, that can give you an informational edge where you can make bets,
[SPEAKER_02]: where the market hasn't built that narrative.
[SPEAKER_02]: But because of your local expertise, you can pinpoint that before everyone else.
[SPEAKER_02]: This is very different than chasing a trend.
[SPEAKER_02]: You've got a melanosis, you need a margin of safety, and a clear thesis for why the market is mispricing the asset.
[SPEAKER_02]: Guess what?
[SPEAKER_02]: After it's up to three, four, five hundred percent, the market's probably not mispricing the asset.
[SPEAKER_02]: Because you can't keep going up in the short term
[SPEAKER_02]: is screaming buying off to us.
[SPEAKER_02]: Let's look at another listener question now.
[SPEAKER_08]: Yes, this is Doug from Georgia.
[SPEAKER_08]: I haven't missed a day of the podcast and at least the last seven years, but I was looking for a decent ETS and found the I shares core dividend ETS, the DIVB, not really for the dividend part of it, but it follows companies that
[SPEAKER_08]: It seemed to be spread fairly evenly across information technology, financials and industrials and health care, but it also had other parts of the market as well, but those were the main full parts of it.
[SPEAKER_08]: I know I'd be Amazon's 5% of it, the last two days hasn't been a good thing, but the expense ratio is 0.05% anybody just wanted to get your thoughts and appreciate any information.
[SPEAKER_08]: Thank you.
[SPEAKER_02]: Well, first off, thank you for being such a loyal listener.
[SPEAKER_02]: I'm not missing a show for seven years.
[SPEAKER_02]: That's some loyalty there.
[SPEAKER_02]: You'd probably be definitely the top one percent of invest luck listeners.
[SPEAKER_02]: So we really appreciate that.
[SPEAKER_02]: Now, I, sorry, DIVB, the I shares core divinity TF.
[SPEAKER_02]: First thing I like about it is it's more midcap.
[SPEAKER_02]: It's more of the midcap value fund, low expense ratio.
[SPEAKER_02]: Puaeshios 2.7% sorry, not Puaeshio.
[SPEAKER_02]: Which is not low, but not crazy high.
[SPEAKER_02]: I like that it's not just chasing the highest dividend payers.
[SPEAKER_02]: So I like it from that aspect.
[SPEAKER_02]: It's still pretty overweight technology.
[SPEAKER_02]: 31% of the portfolio's technology, like you said IBM, now it's the second largest holding after this recent drop.
[SPEAKER_02]: ADP is its top holding now, which is a solid business.
[SPEAKER_02]: Then Accenture, which is, I think struggling in the age of AI with, you know, will Consulting be as good a business going forward as it happened in the past, probably not.
[SPEAKER_02]: JPMorgan is next pretty good.
[SPEAKER_02]: Hey, checks.
[SPEAKER_02]: Next pretty good.
[SPEAKER_02]: And I think my issue is just, that's, those couple of those top holdings, which amounts to,
[SPEAKER_02]: and it's so tech-heavy.
[SPEAKER_02]: So some good, some bad.
[SPEAKER_02]: I think you can do a bit better.
[SPEAKER_02]: I would like to see more diversity based materials less than 1%.
[SPEAKER_02]: Healthcare's 14, it's a little high for my liking.
[SPEAKER_02]: Real estate's only three.
[SPEAKER_02]: I like to go up a little bit.
[SPEAKER_02]: Industrial's only 4% of the portfolio.
[SPEAKER_02]: I like that also to go up considerably.
[SPEAKER_02]: So it's underweight a lot of the sectors
[SPEAKER_02]: have more exposure to and overweight a lot of sectors that I would want less exposures like technology.
[SPEAKER_02]: So I like the core of this, the base layer, but how it comes up with the portfolio and where it ended up, kind of worries me.
[SPEAKER_02]: So I would need to see the whole
[SPEAKER_02]: be all of what I would invest in within a particular portfolio.
[SPEAKER_02]: Thanks for the call.
[SPEAKER_02]: Let's go answer another listener.
[SPEAKER_02]: Question now.
[SPEAKER_06]: This is Rob calling from Las Vegas.
[SPEAKER_06]: I wanted to see if I could ask your insight and analysis on Linux international.
[SPEAKER_06]: The stock symbol is L-I-I.
[SPEAKER_06]: I have this as a position in my industrial portion of the portfolio.
[SPEAKER_06]: I just wanted to see if there's any future potential with this future growth or if I should potentially trim on this or what your thoughts are.
[SPEAKER_06]: I'll be looking forward to your answer on the next podcast.
[SPEAKER_06]: Thank you.
[SPEAKER_02]: All right, looking at Lennox International, the design manufacturing market products for heating ventilation, air conditioning, and refrigeration.
[SPEAKER_02]: decent, but here's my issue, with what's going on in AI data centers, you would think that their business is doing, going to do much better.
[SPEAKER_02]: There's a lot of other HVAC companies that are growing much better than this.
[SPEAKER_02]: So clearly, their products are not the type of products that are being picked up by data centers.
[SPEAKER_02]: I would want exposure to those that had that level of expertise, had that level of growth.
[SPEAKER_02]: The profit bill is very good.
[SPEAKER_02]: The fee cash flow yield is, okay, it's only about three and a half percent, I'd want that to be much higher, free cash flow is flattened out so you've had very minimal growth
[SPEAKER_02]: And based on forward-looking earnings, you're still paying a low 20s multiple.
[SPEAKER_02]: I just think it's a bit too expensive for the lack of growth.
[SPEAKER_02]: Fung and pay above market multiples, I want it to be having growth accelerated.
[SPEAKER_02]: You're seeing the opposite now.
[SPEAKER_02]: than only 5% this year, 9% next year.
[SPEAKER_02]: I just think you can find better within this industry that's more tied to AI data center build-outs.
[SPEAKER_02]: Thanks for the call.
[SPEAKER_02]: What are we going to do next?
[SPEAKER_02]: Let's go to one more voicemail.
[SPEAKER_04]: Hi, Justin, our look, this is fade from Charlotte North Carolina.
[SPEAKER_04]: I'm looking to check your inputs on RB and B because symbol B, B and B, RB and B. I'll listen your response on the podcast.
[SPEAKER_04]: Thank you so much.
[SPEAKER_02]: Alright, looking at RB and B.
[SPEAKER_02]: This is an interesting one.
[SPEAKER_02]: What IPO?
[SPEAKER_02]: Oh, it goes that.
[SPEAKER_02]: 2021.
[SPEAKER_02]: And it's a good example of
[SPEAKER_02]: You don't only want to buy these initial IPS, this moved up all the way to over $200 per share, and it's been kind of meandering since now at $148, and that's after a recent rally where it bought them in the fall around $1,1,1,1,1.
[SPEAKER_02]: So the student, okay, earnings this year is supposed to be $5,12, and $60,7 next year.
[SPEAKER_02]: I won $48, not bad.
[SPEAKER_02]: Profitability of turning equity $31 per cent, $4.5 billion in free cash flow.
[SPEAKER_02]: That is slow, though.
[SPEAKER_02]: Growth is considerably.
[SPEAKER_02]: They have a very good balance sheet, actually about $11 billion in that cash and that's balance sheet.
[SPEAKER_02]: What's it, James?
[SPEAKER_02]: If I can make shares, yeah, if I can make shares pretty aggressively.
[SPEAKER_02]: So I'm liking that.
[SPEAKER_02]: No dividend, but their dividend is really that, that's shared by back to me on this.
[SPEAKER_02]: Overall, I actually am sorry to like the numbers a little bit.
[SPEAKER_02]: It's not as cheap as I would like to be frank, but if it hits those numbers for next year,
[SPEAKER_02]: starts to look attractive.
[SPEAKER_02]: It's last year in $4 and $3 and $5 this year.
[SPEAKER_02]: It's based on this year's earnings, 30 multiple.
[SPEAKER_02]: It's a little high.
[SPEAKER_02]: My issue is that analysts are downgrading earnings from next year.
[SPEAKER_02]: So I would want to consider a pullback, but this has started becoming named that is looking relatively attractive.
[SPEAKER_02]: So once again, I want to put a little more of a pullback to get a better value, but I like the balance sheet.
[SPEAKER_02]: I like the cash flow.
[SPEAKER_02]: Even though growth is slowed, it's still a quality business.
[SPEAKER_02]: That's Airbnb, definitely on the watch list has a potential buy down around.
[SPEAKER_02]: I'll call it 130.
[SPEAKER_02]: The 130 range, I'd pick up Airbnb.
[SPEAKER_02]: Thanks for what they call.
[SPEAKER_02]: Now we're going to head into,
[SPEAKER_02]: our final break.
[SPEAKER_02]: It's been a productive show.
[SPEAKER_02]: I think we've answered a lot of questions, but let's make it even more productive.
[SPEAKER_02]: Let's hear what's on your mind.
[SPEAKER_02]: I want to know what's on your mind.
[SPEAKER_02]: 8-8-99 chart is the number as usual.
[SPEAKER_02]: Maybe it's about the chip sector.
[SPEAKER_02]: Do you feel like this pullback is a buying opportunity?
[SPEAKER_02]: Do you have a name that's on your watch list?
[SPEAKER_02]: Maybe it's an income play.
[SPEAKER_02]: What's going on with the Fed?
[SPEAKER_02]: Interst rates.
[SPEAKER_02]: All that, anything money related to we are here to talk about it.
[SPEAKER_02]: This is the best talk I'm just inclined.
[SPEAKER_02]: We have one goal each and a week.
[SPEAKER_02]: They help you become a better investor.
[SPEAKER_02]: Help you achieve your own version of Fetch or Freedom.
[SPEAKER_02]: I work continues after this final break.
[SPEAKER_02]: Which questions are now at 8 a.m. 9 chart?
[SPEAKER_01]: Justin Klein is here and ready to tackle your questions.
[SPEAKER_00]: Curious if you think it'd be better for me to let it go and spend money elsewhere.
[SPEAKER_02]: Well, first off, never take one man's opinion as gospel, including my own.
[SPEAKER_01]: Invest talk is ready 24-7.
[SPEAKER_01]: When you give a recommendation on your show for a buy-in, like an entry point to buy a stock, if I already own it, should I go ahead and be looking to sell it?
[SPEAKER_01]: Don't forget to call.
[SPEAKER_01]: Invest talk 888-99 chart.
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[SPEAKER_03]: Invest talk 88899 chart.
[SPEAKER_02]: It's good that the Shane in San Francisco looking at charter communications.
[SPEAKER_02]: Communications CHTR.
[SPEAKER_02]: You're under looking at that.
[SPEAKER_07]: looking to buy it.
[SPEAKER_07]: Okay, for what we did, they obviously, they have some headwinds with the merger of Cox.
[SPEAKER_07]: I know that it's been a about a 10-year, 10-year support that it's tested right now.
[SPEAKER_07]: Quite a large pullback, looking for an entry, interested in your analysis.
[SPEAKER_07]: a lot of debt, 96 billion in debt.
[SPEAKER_07]: I know that that's probably one of its biggest overhangs, but simply looking for a fine opportunity.
[SPEAKER_02]: Well, that is the biggest overhang.
[SPEAKER_02]: The market is continues to punish the name.
[SPEAKER_02]: It's been a massive downtrend.
[SPEAKER_02]: It's all time high.
[SPEAKER_02]: Do you think they go back to a monthly chart here?
[SPEAKER_02]: when money was cheap is easy and now it's the end of a hundred thirty one dollars per share if you're talking about but eighty five percent drop roughly in the share price and it's all because of that that like you said they have ninety four billion dollars in long term that it's a sixteen billion dollar market cap pre-cash flows for billion
[SPEAKER_02]: but that has been in decline this is 2021.
[SPEAKER_02]: That was when it was 8.6 billion.
[SPEAKER_02]: Yes, earnings, if you go based on earnings, it looks cheap, $40 per share.
[SPEAKER_02]: Problem is, is can it continue to pay this debt?
[SPEAKER_02]: It's times interest earned is 2.6.
[SPEAKER_02]: That is also peaked in that peaked back in 2022.
[SPEAKER_02]: So it's telling you the market is telling you that you're trying to pick up pennies in front of the steam rolling.
[SPEAKER_02]: What you want to see with this is a reversal on volume, because if this is saved from bankruptcy for whatever reason,
[SPEAKER_02]: because it will continue to go up and start to be priced like a company that isn't headed for bankruptcy.
[SPEAKER_02]: Right now, based on the momentum, based on the business model, that's what this is saying, that this is going bankrupt, which would make the equity worth nothing.
[SPEAKER_02]: So I think you are stepping in front of a call value trap.
[SPEAKER_07]: Fair enough, I appreciate that.
[SPEAKER_07]: Never.
[SPEAKER_07]: Thanks for taking the time.
[SPEAKER_07]: Never.
[SPEAKER_07]: Thanks to the call.
[SPEAKER_02]: Look at talking about small caps.
[SPEAKER_02]: They're enjoying their best return in one 20 years.
[SPEAKER_02]: The Russell 2000 is up 20% so far this year.
[SPEAKER_02]: On track for the best performance is 2003.
[SPEAKER_02]: GSB is up about 10% the mag 7 is only up about 3% in the year.
[SPEAKER_02]: price in earnings for these smaller cap names, driven by the spending of the Mac 7.
[SPEAKER_02]: So, as you're seeing now, is cash flow and balance sheets of these giant corporations are being spent into the economy, as opposed to spend on buybacks or just held within the
[SPEAKER_02]: Then it's off of that, they're bathing from favorable tax changes as well as heavy depreciation on, you know, from the tax bill on on on capex.
[SPEAKER_02]: Now, the good thing is this is broadening out the market, it's healthier for the market.
[SPEAKER_02]: But is this going to be sustainable is the question, is that spending going to be sustainable?
[SPEAKER_02]: are these types of skills going to run out of balance sheet, run way, because the market sucks financing, $725 billion a year in a infrastructure spending like they are expected to spend this year.
[SPEAKER_02]: So that's, I think the biggest risk in the market, but it does show you, I think there is a secular tailwind to small and mid caps, that is just beginning.
[SPEAKER_02]: and they're still cheap.
[SPEAKER_02]: Then there's a lot of values being locked over time within this area of the market.
[SPEAKER_02]: I'm Justin Klein, reminding you of KAPP Financial's Parallel Investing and make a trade for our clients, make the same trade for ourselves, same time, same price, same percentage go front, running some of those special treatments.
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